Talking Points:
- ASX200 Strategy: Bulls expect tighter target; range traders could prepare for dip buying
- Support levels: 23.6% Fibonacci at 5059.6, then September-November support at 4918.4
- Daily momentum is a leading indicator to changes of direction within the range
The ASX200 reversed from its triple top at 5.305 as we expected in last research. The stock index is heading to a short-term support level and 23.6% Fibonacci at 5059.6. Below that is 4918.4 firm support level that has held through September-November choppy trades. These two supports combined may prevent the ASX from further declines.
Daily momentum has been a leading indicator to the ASX index. Its earlier downturn signalled the downward reversal in ASX. At present, momentum signals are near the lower bound – an indication that the slide of ASX may be contained soon. Observation during the last 6 months shows that momentum signals rarely fell far below this bound.
The bears with short positions could adjust their expectation to tighter target, while keeping a close watch on support levels. For range traders or the bulls who look to buy at dips, daily momentum and its change of direction could be an early indicator.
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